HARRISBURG – In the midst of an FBI investigation, the gigantic PSERS pension plan disowned as poorly drafted an official disclosure form that stated that its top investment workers were also being paid by a company hired to manage its real estate in Harrisburg .
The fund said that in fact none of its staff received any ‘extra pay’ even though the forms said they were paid employees of both the pension plan and the real estate company. . The $ 64 billion fund said it had filed surrogate returns with the IRS “correcting this error.”
The plan’s announcement came in response to questions from Spotlight PA and The Inquirer – and after federal prosecutors subpoenaed information about PSERS’s $ 1.6 million purchase of the old Harrisburg building Patriot-News at 812 Market St. near the Plan Office and other nearby Shopping Properties.
PSERS said it changed the required public disclosure forms for the nonprofit 812 Market Inc. established in 2017 to hold title to Harrisburg real estate. Without modification, the forms say that PSERS Director of Investments James H. Grossman Jr., and two of its employees serve on a board of directors of 812 Market Inc. whose officers include senior executives from PMI Property Management, Inc., the Harrisburg-area company that deals with real estate. .
While the original forms indicate in one section that Grossman and the others received no money from their board membership, the records also indicate elsewhere than him and the others, MP Charles Spiller and senior real estate manager. William Stalter, work for and get paid by PMI.
“The officers and directors of 812 Market Street, Inc. are employees of PMI Property Management, Inc…. », Indicate in part the documents. “PMI Property Management, Inc, pays the executives of 812 Market Street, Inc.”
Grossman is the highest paid employee in the state of Pennsylvania, earning $ 485,421 per year. Spiller (and another Grossman assistant) are the 2nd highest, making $ 399,611. Spiller is the fund’s leader in real estate investments and informs its board of directors on such purchases. Stalter, who is also a real estate expert, is paid $ 241,801.
Efforts to reach the three officials of the PSERS were unsuccessful. PMI executives Eric Kunkle and David Dyson declined to comment. PMI was paid $ 30,000 per year during the last fiscal year to manage the properties. No one has been charged with any crime in connection with the federal PSERS investigation.
PSERS is the abbreviation for Pennsylvania School Employees’ Retirement System. One of the largest pension plans in the country, it sends more than $ 6 billion in checks annually to 265,000 former teachers and other retired public school staff. It is supported by its investments and by payments from active educators and taxpayers.
The fund’s image, which has come under increasing criticism for its mundane returns on investment, has taken a hit since the federal inquiry was announced in March. As Spotlight PA and The Inquirer have previously reported, federal prosecutors and the FBI are using a grand jury and subpoenas to investigate real estate purchases in Harrisburg, as well as the board’s adoption last year of a figure that falsely exaggerated its investment profits. The board then changed course in April and said newer school employees should pay more for their retirement, from July 1.
State Senator Katie Muth (D., Montgomery), who became a member of the PSERS board this year, said on Monday that she asked the fund’s management weeks ago for information on the nonprofits and real estate investments in Harrisburg, but had never received responses. The response, she said, was, “We are still reviewing it. “
In its statement on Monday, the pension system said it had created non-profit organizations to own real estate in order to guard against lawsuits “in order to limit legal risks.”
PSERS did not specify when it filed the revised forms. As The Inquirer and Spotlight previously reported, federal prosecutors requested information on Harrisburg real estate in subpoenas dated March 24. At a May 5 board meeting closed to the public and media, attorneys at law firm Morgan Lewis, one of three firms hired by PSERS to respond to the FBI investigation, informed the board of administration of the disclosure forms and said he was investigating whether staff were paid by the real estate company and whether the board even knew that nonprofits had been formed, sources said.
The fund has created about a half-dozen nonprofit organizations to hold the titles of its some 15 real estate investments across the country, according to IRS records. While Monday’s statement cites only one, public records from 812 Market Inc. show that the same flawed language is found in documents filed by two other PSER nonprofits, one for them. headquarters buildings and one for a shopping center in San Antonio, Texas.
Before the board issued its statement, reporters asked Charles Elson, a professor of finance at the University of Delaware and an expert in corporate governance, to review the documents, known as 990, named after their official IRS form number. He said they were either “poorly worded” or revealed a clear conflict of interest for PSERS.
“It puts these people on both sides of the deal,” Elson said. “You are an employee of the pension system, but why are you working and being paid by an entity that does business with the pension fund? “
While PSER invests its billions primarily in stocks, bonds and unlisted private equity firms, it has also acquired real estate directly, purchasing properties worth $ 1.1 billion. His the farms are eclectic – too many, say reviews – ranging from a mall to Fort. Lauderdale to mobile home parks in Michigan to a pistachio orchard in California.
In 2017, PSERS began buying properties closer to home. The agency kept the purchases secret, keeping the plans confidential. Beyond the demolition of the Patriot-News building, nothing visible has been done to real estate. At one point, fund executives told the board that the plan could partner with Harrisburg University of Science and Technology on an office tower, but the university recently said nothing was wrong. had arisen from that.
His first major purchase in Harrisburg was the $ 1.6 million purchase in late 2017 of the printing plant and offices of Patriot-News. Over the next three years, the fund spent an additional $ 1.4 million to purchase seven more properties, a mix of buildings and parking lots. The fund’s internal documents indicate that it spent up to an additional $ 7 million on demolition and “site development costs.”
In another development of the PSERS, the fund released a separate statement on Monday about its decision to pay private lawyers for eight anonymous staff members. He released the statement a day after The Inquirer published an article on how the agency will pay up to $ 40 million in total legal bills over the course of a year for staff involved in an investigation. The fund will also continue to pay employee defense lawyers until the outcome of any trial.
The fund said it would be “manifestly unfair” to force its staff to pay lawyers and said the fund could recover money if “an employee is later convicted of a criminal offense.”
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